What government does and why it does it

Social equity

Public goods, private goods, toll goods, & common pool resources

Market failures

Externalities

Monopolies

Information asymmetries

Transaction costs

Blackboard readings

Are there really any pure public goods?  Listen to this interesting interview on NPR with Ronald Coase who won a Nobel Prize in economics for the Coase theorem that describes the economic efficiency of an economic allocation or outcome in the presence of externalities. 

Cigarette smoke is a classic negative externality.  See this interesting set of articles discussing the risks of second hand smoke (2006) and a 2004 article about the local debates before the NC law changed (2004)

Noise creates a negative externality as well.  See this interesting set of articles discussing noise pollution (USA Today 2008)

Fire protection was once delivered primarily as a public good. and still is in some places.  See this interesting article about someone whose house burned down because he didn't pay his fee in rural Tennessee (MSNBC 10/10)

An interesting information asymmetry in education is the lack of knowledge about the quality of individual teachers.  See this interesting article on the debate surrounding proposals to rate teachers (USA Today 9/10)

One of the ways government resolves information asymmetries is by using warning labels.  See this interesting  FDA Proposal to change cigarette warning labels ( NY Times - 11/10).  Another good example are the information asymmetries that exist within the health care industry due to the way health insurance and billing works.  Ever wonder what the real cost of the last doctor's visit was?  How about the cost of a basic surgery like an appendectomy.  I bet you would be surprised to learn that the cost ranges from $1,500 to $180,000 according to this study conducted by the USA Today (4/12).  Ever wonder how the health care industry would change if doctors were required to publish and distribute a price list?  It should also be noted that labeling efforts are often fraught with controversy.  A good example are the debates surrounding proposals to label foods containing genetically modified organisms (GMOs) (NY Times 5/12). 

Is the internet a public good?  See this interesting editorial from the Washington Times that discusses the future of the internet (12/10)

Abortion and the rights of women and the unborn are clearly a controversial policy issue.  While rationalizing policies on religious or moral values is dangerous, the recent debate in Raleigh is interesting from a policy standpoint because it raises questions about whether consumers (e.g., someone seeking an abortion) have adequate information to make the decision (download the article describing the recent legislative proposals in Raleigh (6/11).  While government clearly can mandate information provision it also has to be careful when the rationale creates hardships by imposing excessive labeling, information disclosures, waiting periods, etc.

Do you think the Christmas Tree has an image problem?  Should the producers of Christmas Trees get taxed to pay for an advertising campaign to promote the sale of Christmas Trees?  What would be the rationale for government intervention in this case (Download articles from 11/9/11)

Sometimes, it is hard to clearly determine what the rationale is for government intervention is in the market.  A classic example is the construction of a Sports Stadium.  See this collection of articles about the effort to build a minor league baseball stadium in Wilmington and see if you can identify the rational for government intervention. 

Download as an adobe acrobat file

Figures - Rationales for government intervention

Exercise: Rationales for government intervention

Interesting You tube video clip on the differences between disposable and cloth diapers

Weimer, David L. and Aidan R. Vining. 2005. Policy Analysis: Concepts and Practice. Fourth Edition. Upper Saddle River, NJ: Prentice Hall.